In this note we describe how we have been trying to rethink development economics in our own research programme and teaching (both graduate and undergraduate) practice in the Instituto de Economia at the Universidade Federal do Rio de Janeiro, Brazil.

In our view, traditional development economics , in spite of its great achievements, suffered from two serious problems. First of all, development economists had a chronic tendency to jump too quickly to the normative dimension, to suggesting policy interventions while perhaps not having clarified sufficiently how the developing economies actually functioned. This tendency was so deeply entrenched that often some of the best development economists fell into the habit of treating the developing capitalist economies as if they were planned or socialist systems (witness Kalecki’s treatment of what he called “mixed economies” or the widespread use of “Say’s Law” in Latin American Structuralist literature).

The other, very much related, basic shortcoming of development economics was the fact that development economists did not in general engaged themselves into a detailed discussion of the normal operation of the market mechanism , of what it could or it could not realistically achieve. That often led to some underestimation of the difficulties of planning on the product markets and , more importantly, to enormous confusion and ambiguity concerning what happens in the markets for the so called factors of production (i.e. how distribution, labour employment and capital utilisation are actually determined).

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